Perfect Competition -by Rahul Thekdi

I hold the power to control the economy. Not only I but also you have the power to do so. We as consumers have the capability to influence the market as a whole and it is our consumption that leads to their production.  The simplest law of Economics states that “If the demand increases the supply increases”. Who is this demander ? Why is the whole market centered towards fulfilling the requirements of this one individual? The answer to all these questions is very simple.

Our Economy, of finance and of course the GDP is directly or indirectly controlled by the consumer. We have been studying since a long time that consumer is just a minor part of the whole circle and that right now I sound very anti- economic but the fact according to me is that all the changes, modification, advancement and everything that happens in the economic is somehow led by this group of individuals who form the pillars of the grand structure we call “National Economy”.

That certainly was some food for thought, wasn’t it? Anyway after tickling your brain cells I would like to draw your attention to something that we all know by the name of “Pure Competition” or “Perfect Competition”. For all those “Economically Backward” (PUN intended) people including me, you can take a sigh of relief as there will be no use of Jargons or any strong economic terms that leads you to depression.  Have you heard tag lines like “Sab se sasta”, “We serve the best”etc ?  These are taglines of some of the most well to do firms in today’s market. What is it that made their idea work brilliantly well? Is it that they are the only ones selling these goods, certainly NO.? The success story of major retail brands in India is intensive research, concentrating on the target audience and most importantly recognizing the subject and efficiently working on it.

These firms still face tough competition from other retail houses but they have discovered the key that opens the lock to “Perfect Competition”.  What is this “Perfect Competition”? It can simply quoted that “Perfect Competition” is a market where many sellers sell the same uniform good at a uniform price using all the fair means to maximize his profit . I was recently travelling by the Pune Public Transport to go to Mumbai and was astonished to see the many options available to me in the Bus service itself. It is great business you know but, tomorrow if I want to open my own travels, start my new business will I be able to do so? No, it is very difficult to build yourself in a market like this. So the first condition does not match the characteristics of “Perfect Competition”. If we see carefully all the buses are not the same, some of them are AC buses, some non AC that is regular and some that are below regular. Thus there is no uniformity in the goods provided, which brings down another condition that does not match “Perfect Competition”.  In certain cases the Government supervises the fares set by the bus unions; this kind of intervention by the Government unbalances constituents of “Perfect Competition”. “Perfect Competition” in this sector is not applicable for all the obvious reasons and accordingly is well justified.

Click here for government certifications